Controversy

“He has a deep knowledge,” says Joerg Asmussen, a German member of the European Central Bank’s executive board. “After Mark Carney, in the international economic-and-financial world, he is the most known and respected Canadian.”

Potential governor material

After a speech in Washington in December, Conference Board of Canada chief economist Glen Hodgson was asked by a member of his audience to handicap the field of prospective Bank of Canada governors. As a former Finance official who also worked at the federal export agency, Mr. Hodgson knows his way around Ottawa. He told his audience that if the choice wasn’t Mr. Macklem, it would be a name he had never heard uttered.

That level of certainty only has hardened in the weeks since.

A lecture Mr. Macklem gave at Queen’s University in January was viewed by some on Bay Street as something of a debut, as the former Bank of Canada researcher described in detail for his alma mater the major challenges facing Canada’s economy, including an analysis of why Canada’s relatively sudden struggle to compete in export markets is a far deeper issue than a strong currency.

Mr. Macklem, a 51-year-old native of Montreal, first joined the Bank of Canada in the mid-1980s, where he quickly impressed as a talented and hard-working researcher. He steadily climbed the ranks, joining the Governing Council, the committee that advises the governor on interest rate decisions, in December, 2004.

When Mr. Carney left the suite at the Finance Department reserved for senior deputy ministers after being selected governor in 2007, Mr. Macklem replaced him. He would spend the next few years on the front lines of the global fight against the financial crisis with Mr. Carney and Mr. Flaherty. In 2010, Mr. Macklem returned to the Bank of Canada after winning a competition for senior deputy governor.

Within the institution, he long has been seen as potential governor material. “It was a challenge to find something that he wasn’t already aware of,” says Sébastien Lavoie, an economist at Laurentian Bank of Canada in Montreal who worked for Mr. Macklem at the central bank. “It just comes naturally to some people.”

Still, there is a slight reluctance on Bay Street to commit to a coronation. That’s in part because recent history has mocked the wisdom of the crowd. In each of the past two competitions to lead the Bank of Canada, the heirs apparent – Malcolm Knight and Paul Jenkins, both senior deputy governors – lost to outsiders David Dodge and Mr. Carney, respectively.

Mr. Flaherty also muddied the waters in January when he issued a press release stating that he would interview the top candidates. Mr. Flaherty also vetted Mr. Carney personally, but he didn’t advertise it. Mr. Flaherty’s press release was seen by some as a reminder that the selection of the central bank governor ultimately is a political decision – and that politics are inherently uncertain.

Economists at New York-based JPMorgan Chase & Co. published a report early this month that put the odds of Mr. Macklem becoming the next Bank of Canada governor at slightly better than 50 per cent. “The market is underestimating the possibility of a surprise,” Kevin Hebner and Sandy Batten advised the bank’s clients.

That’s not how TD’s Mr. Alexander sees it.

He handicaps the race for governor by thinking about all the qualities that the leader of the Bank of Canada should possess. Mr. Alexander says Mr. Macklem is the only candidate who meets all the criteria.

Kevin Lynch, vice-chairman at Bank of Montreal, might be a dream recruit if only he were younger.

He possesses all the qualities that a modern central bank governor needs. Mr. Lynch, a PhD economist, ran the Finance Department, Industry Canada, the Privy Council and represented Canada at the International Monetary Fund over a 33-year career in Ottawa that began at the Bank of Canada in 1976. But he says he’s not interested in the job. “I intend to stay retired” from public service, he told The Globe and Mail in an interview in November.

Christopher Ragan, an economics professor at McGill University in Montreal, and Andrew Spence, a managing director at the Ontario Municipal Employees Retirement System, both are regarded highly for their knowledge of monetary policy, and both have spent some time in government and at the Bank of Canada as advisers. (Both have said they would be “honoured” to be considered, without stating specifically that they had applied for the job.)

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